China and India may contribute to the restoration of the global economy« Back
The world is on the verge of global change. The coronavirus pandemic undermined the world's largest economies and slowed the pace of economic growth in most countries. According to IMF forecasts, China and India will be among the countries that will maintain economic growth by the end of the year, and China will become a locomotive of global economic recovery.
In an interview, the head of the HSE School of Oriental Studies, Andrei Karneev, said that it was necessary to carefully predict the way China, India and other developing countries out of the current economic situation.
Despite the fact that the PRC authorities were able to take control of the epidemiological situation in the country, and the number of new infections with coronavirus infection was minimized, now China faces a new test - economic recovery. Most experts are of the opinion that an economic downturn in the PRC is inevitable. According to published data from the State Statistical Office of the PRC, in the first quarter, the economy contracted by 6.8%. At the same time, investments in fixed assets and retail sales decreased by about 20%. Quarantine measures taken to combat the spread of the epidemic led to a halt in production. The service sector was particularly affected: the tourism sector, catering, and logistics.
According to Karneyev, domestic consumption can play a decisive role in restoring the Chinese economy. Do not forget that China’s rapid exit from the epidemic was largely facilitated by the decisive measures taken by the Chinese government. Nevertheless, as noted by Karneev, China is afraid of the second wave of the epidemic provoked by “imported” cases of coronavirus infection.
“China’s achievement of high rates of economic growth is impossible without export markets, which, due to the COVID-19 pandemic, are not optimistic,” the expert notes.
The spread of coronavirus in other countries has led to a reduction in world demand, including for Chinese products, which greatly complicates the ability of China to quickly restore its own, largely export-oriented economy. A ubiquitous isolation regime blocks the movement of vehicles, goods and services. According to the IMF forecast, US GDP in the second quarter may fall by almost a quarter, and by the end of the year, a fall of 5.9% is expected. Italian GDP this year will decrease by 9.3%, Spain - by 8%. The IMF expects that almost all developed countries at the end of the year will inevitably face an economic decline of 6.1% on average. Ultimately, this can lead to serious disruptions in the global supply chain.
The fall in global oil demand is also affecting the state of the global economy. However, China is actively replenishing its oil reserves, taking advantage of low prices for raw materials, which may support the market for some time. China's crude oil imports rose 5% year-on-year in March, despite a slowdown in the economy. According to Eurasia Group estimates, about 31.5 million tons of oil is currently in storage facilities in China, which is approximately 65% of the total storage capacity in the country. According to the expert, in the future, China can stabilize, if not the entire world economy, then at least some key industries. For example, the rapid recovery of Chinese industry will create additional demand for energy and help stabilize this market.
Speaking about the situation in India, Karneev pointed out the high volatility of its economy. The country has closed borders between states, limited transport, industrial enterprises are closing down, and the tourism industry is suffering losses.
However, the expert notes, the large working-age population and low wages create attractive conditions for foreign investors. In addition, India is a highly competitive market with long traditions of a market economy.
Karneev also gives an example of the formation of the Chinese economy, emphasizing that India could partially repeat the path of China. She has all the factors that will help her become another driving force behind the economic growth of Eurasia and the whole world, the expert concluded.